How To Raise Business Funding

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Typically Angel Investments are one of the last sources of capital to fund business expansion. But it doesn’t need to be this way.

With every early stage business there comes a time when you’ve exhausted the more immediate forms of finance and you are either starting to become a real contender in your market or have supreme confidence in your company’s prospects.

You may have decided that you do not feel comfortable with securing more debt against your company’s assets, you are unwilling to take on more personal debt via a re-mortgage or credit card, you may have invested all of your, or your family’s, savings and feel unwilling to approach companies about the Small Firms Loan Guarantee Scheme.

When it comes to venture capital, you are generally expected to make over £1 million of share capital available for the venture capitalist and they generally expect a significant say in the direction your business will take.

There is, however, another option. Angel Investors generally invest anywhere from £10,000 to £250,000 and will work closely with you to maximise both their own and tour personal return.

If you have not got the assets to raise debt finance it will be unlikely that you’ll be able raise further capital without offering some of your business in return for the much needed cash.

With these debt finance options you are able to be vague with your objectives for the funding. However, when you bring in an Angel Investor they will have their own money at stake, so you will be required you to be crystal clear regarding the organisation’s current financial situations and how you will use any finance to take the company forward.

Offering part of your business to an Angel Investor will allow you to bring significant levels of expertise to the business without paying them a salary which can offer significant cash-flow advantages over the alternative sources of hiring human-capital.

One of the important factors in determining the likelihood of securing Angel Investment is the quality and robustness of your business plan – as well as the potential performance of your business and products. We have produced or top 5 quick tips on writing a business plan, however, if you need comprehensive information we have gone into significant detail about how to write the type of business plans suitable for securing angel investment here.

There are few facts that should be considered when looking to raise investment finance:*

• Angel Investors are typically 45 to 65 and have taken early retirement

• Business Angels don’t expect that every angel investment will earn significant returns. They are aware that around 40% of their angel investments will result in a partial or complete loss.

• 90% have worked for themselves or within a small business; hence they are generally aware of the issues that you face on a daily basis.

• You can expect to meet a potential Business Angel at least five times before investing. This compares to ten times with venture capital. You could potential speed this process up via Speed Pitching.

• Ten per cent of business angel investments are actually for less than £10,000 and forty five per cent are for over £50,000.

• Angels are more inclined to invest in businesses within an hour of their location.

• Business Angels often invest together. A quarter of all deals are when Business Angels invest together.

• Angel investors are significantly more likely to invest in start-ups or early-stage businesses than Venture Capitalists.

• Business Angels are more likely to invest when they can build up a strong relationship with you.

• Business Angels typically look for a calculated annual return of 20%-30%.

• Angel investors require you to have a strong and complete understanding of your products and the industry you operate in.

• If you are looking for expansion finance you will need to provide a proven sales track record that can be built upon.

• Angel Investors would expect to raise the topic of “exit” strategies at the outset of discussions. This is where they will realise their investment. Typically this would entail a trade sale of the business to another company, the purchase of the angel’s shares by the company or by you.

But how do you find a business angel?

Angels Den offers a service that allows you to place your business summary your requirements onto a searchable database which Business Angels who are able to prove their credentials can use to find businesses to invest in.

If you would like to find out how to get started, click here or if you would like to ask some questions you can find our contact details here.

* Source: My Business